The Bahamas is “well beyond” the point where it merely needs to “stabilise” its $6.6 billion national debt, a former Chamber chairman said yesterday, as he warned that the economy was showing “no desire for growth”.
Robert Myers, now a principal with newly-formed civil society group, the Organisation for Responsible Governance (ORG), said Bahamians would likely only realise the consequences of successive governments’ fiscal profligacy “when they slam into the wall”.
Suggesting that too many were ignoring “the writing on the wall”, Mr Myers said the Bahamas now stood “on the edge of fiscal doom”, with little to no capacity to respond to a major economic shock.
He was responding after a newly-released Inter-American Development Bank (IDB) report, revealed by Tribune Business on Monday, suggested that the Government’s medium-term fiscal consolidation plan was “insufficient” to make major inroads into cutting the national debt and associated ratios.
The IDB’s Caribbean Quarterly Bulletin said the plan would only stabilise the debt at its current level, adding that the Bahamas now stood on the “dark side” of the debt-growth relationship, where any further increases in the national debt will further depress GDP expansion.
And, based on the economy’s forecast 1 per cent growth rate, the IDB forecast that a 7 per cent ‘fiscal adjustment’ - equivalent to $560 million - was required on the Government’s primary balance to cut the debt-to-GDP ratio from its present 76 per cent to 60 per cent by 2021.
“That’s what happens if yu keep borrowing and are not accountable,” Mr Myers told Tribune Business. “We’ve said it’s coming. We’ve told everybody it’s coming, and it is.
“If they [Bahamians] can’t see the writing on the wall, maybe they’ll feel it when they slam into the wall. We can’t say it more plainly than we have.”
The IDB report added that the Bahamas also required a 3.4 per cent ‘adjustment’, equivalent to $270 million of GDP, just to stabilise the debt-to-GDP ratio at its current level north of 76 per cent.
Mr Myers, though, suggested that even achieving this target was inadequate, given that the Bahamas had effectively used up any borrowing capacity it could employ to a major economic emergency, such as a September 11-type event impacting the world economy, or a major hurricane directly hitting Nassau.
“What happens, God forbid, if fuel prices go up before that [debt stabilisation] or a major hurricane hits Nassau?” Mr Myers asked. “We’re wiped out.
“They’ve pushed us to the edge of fiscal doom, and we have no financial contingency. One misstep here, and we’re gone. We’ve got to be thinking well beyond stabilisation, and the stage of stabilisation, at this point.”
The IDB report agreed that the Bahamas’ current debt metrics provide it with little capacity to respond should it be faced with a major catastrophe or natural disaster.
It added that the fiscal buffers for all Caribbean nations, including the Bahamas, were “inadequate”. With only Jamaica forecast to produce “an unambiguous improvement”, the IDB warned that there was “a deteriorating limited policy space to respond to negative external shocks”.
Disheartened by the political elite’s response, Mr Myers said: “What are any of the political parties plans to move the country forward in a meaningful way?
“They’re talking more about who’s going to run in each constituency, while there’s a real crisis going on. What are they going to do about the fundamental socio-economic problems?
“They’re not growing anything or managing anything. All they do is find more hurdles to the ease of doing business than less, more taxes, and more nonsense and more rubbish that gets in the way of growth,” he continued.
“You read all the stuff you have to go through to get a Business Licence; it’s obscene, and they’re not doing anything to make it attractive to come here and want to do business.
“Agreements are not transparent, there is no openness in public tendering. This isn’t a place where there’s any ease of doing business, any desire for growth.”
My Myers pointed to the fate of his Freeport business venture, VTRade, as an example of what happened when the Government suddenly introduced new or increased taxes without warning.
“That’s what put us out of business in Freeport,” he recalled. “They increased Customs attendance fees, and implemented these stupid 1 per cent processing fees in and out. That put me out of business in less than a month-and-a-half.
“I fought it for 18 months before they revised half of it. They [the Government] have no understanding. They’re not business people. They don’t have the cognitive ability to bring the business people in before they throw these hare-brained plans down our throats.
“If they’re not smart enough to be in business, at least consult the business community before you destroy it.”
Mr Myers said “clamping down” with regulations and taxes would only weaken economic growth, and added: “Look at Venezuela; tell me how that’s working out. Look at Greece and Puerto Rico; tell me how that’s working for them...
“It’s [the IDB report] not surprising. I said it two years ago: We can’t have tax reform without fiscal reform. We can’t have VAT without fiscal reform. It was critical, number two on the list. Yes, we have to solve the immediate problem, but we must have fiscal reform.”
Mr Myers also expressed surprise that Khaalis Rolle, minister of state for investments, was continuing to meet with investors, given that the Bahamas “was
strewn with red tape and on the verge of fiscal instability”.